UPDATE 1-Brazil cbank says confident of 2012 inflation target

LONDON Feb 9 (Reuters) - Brazil's central bank is
"confident" that inflation will fall towards 4.5 percent, the
centre of its target range by the end of 2012, the central
bank's deputy governor for monetary policy said on Thursday.

Inflation ended last year at 6.5 percent, the highest rate
in seven years -- the ceiling of the central bank's target
range.

"Internal activity is moderating and commodity prices will
be lower...We are confident inflation will reduce to the central
part of the target, which is 4.5 percent, by the end of 2012,"
Aldo Mendes told an investment conference.

The central bank's forecast is lower than expectations of
private economists who expect average inflation of 5.29 percent
this year, indicating the economy could be picking up steam
again after several interest rate cuts.

There are also fears increased public spending will
re-ignite inflation while the central bank has signalled
interest rates could be cut further.

Mendes said most leading indicators were implying a
slowdown, with the pace of industrial production and retail
sales having eased in the second half of 2011.

"The trend is for deceleration," Mendes said, adding that
the central bank is expecting the economy to expand by 3.5
percent in 2012 after a likely 3 percent last year.

He also told the conference that Brazil would receive
foreign direct investment (FDI) of around $50 billion in 2012,
slowing from over $66 billion last year.
(Reporting by Sujata Rao and Alessandra Prentice)